Chapter Four: “Pirates”

If “piracy” means using the creative property of others without their
permission—if “if value, then right” is true—then the history of the content
industry is a history of piracy. Every important sector of “big media” today—
film, records, radio, and cable TV—was born of a kind of piracy so defined. The
consistent story is how last generation’s pirates join this generation’s country
club—until now.

Film

The film industry of Hollywood was built by fleeing pirates. [1] Creators and
directors migrated from the East Coast to California in the early twentieth
century in part to escape controls that patents granted the inventor of
filmmaking, Thomas Edison. These controls were exercised through a monopoly
“trust,” the Motion Pictures Patents Company, and were based on Thomas Edison’s
creative property—patents. Edison formed the MPPC to exercise the rights this
creative property gave him, and the MPPC was serious about the control it
demanded. As one commentator tells one part of the story,

“A January 1909 deadline was set for all companies to comply with the license.
By February, unlicensed outlaws, who referred to themselves as independents
protested the trust and carried on business without submitting to the Edison
monopoly. In the summer of 1909 the independent movement was in full-swing, with
producers and theater owners using illegal equipment and imported film stock to
create their own underground market.

“With the country experiencing a tremendous expansion in the number of
nickelodeons, the Patents Company reacted to the independent movement by forming
a strong-arm subsidiary known as the General Film Company to block the entry of
non-licensed independents. With coercive tactics that have become legendary,
General Film confiscated unlicensed equipment, discontinued product supply to
theaters which showed unlicensed films, and effectively monopolized distribution
with the acquisition of all U.S. film exchanges, except for the one owned by the
independent William Fox who defied the Trust even after his license was
revoked.” [2]

The Napsters of those days, the “independents,” were companies like Fox. And no
less than today, these independents were vigorously resisted. “Shooting was
disrupted by machinery stolen, and ’accidents’ resulting in loss of negatives,
equipment, buildings and sometimes life and limb frequently occurred.” [3] That
led the independents to flee the East Coast. California was remote enough from
Edison’s reach that film- makers there could pirate his inventions without fear
of the law. And the leaders of Hollywood filmmaking, Fox most prominently, did
just that.

Of course, California grew quickly, and the effective enforcement of federal law
eventually spread west. But because patents grant the patent holder a truly
“limited” monopoly (just seventeen years at that time), by the time enough
federal marshals appeared, the patents had expired. A new industry had been
born, in part from the piracy of Edison’s creative property.

Recorded Music

The record industry was born of another kind of piracy, though to see how
requires a bit of detail about the way the law regulates music.

At the time that Edison and Henri Fourneaux invented machines for reproducing
music (Edison the phonograph, Fourneaux the player piano), the law gave
composers the exclusive right to control copies of their music and the exclusive
right to control public performances of their music. In other words, in 1900, if
I wanted a copy of Phil Russel’s 1899 hit “Happy Mose,” the law said I would
have to pay for the right to get a copy of the musical score, and I would also
have to pay for the right to perform it publicly.

But what if I wanted to record “Happy Mose,” using Edison’s phonograph or
Fourneaux’s player piano? Here the law stumbled. It was clear enough that I
would have to buy any copy of the musical score that I performed in making this
recording. And it was clear enough that I would have to pay for any public
performance of the work I was recording. But it wasn’t totally clear that I
would have to pay for a “public performance” if I recorded the song in my own
house (even today, you don’t owe the Beatles anything if you sing their songs in
the shower), or if I recorded the song from memory (copies in your brain are
not—yet— regulated by copyright law). So if I simply sang the song into a
recording device in the privacy of my own home, it wasn’t clear that I owed the
composer anything. And more importantly, it wasn’t clear whether I owed the
composer anything if I then made copies of those recordings. Because of this gap
in the law, then, I could effectively pirate someone else’s song without paying
its composer anything.

The composers (and publishers) were none too happy about this capacity to
pirate. As South Dakota senator Alfred Kittredge put it,

“Imagine the injustice of the thing. A composer writes a song or an opera. A
publisher buys at great expense the rights to the same and copyrights it. Along
come the phonographic companies and companies who cut music rolls and
deliberately steal the work of the brain of the composer and publisher without
any regard for [their] rights. [4]

The innovators who developed the technology to record other people’s works were
“sponging upon the toil, the work, the talent, and genius of American
composers,” [5] and the “music publishing industry” was thereby “at the complete
mercy of this one pirate.” [6] As John Philip Sousa put it, in as direct a way
as possible, “When they make money out of my pieces, I want a share of it.” [7]

These arguments have familiar echoes in the wars of our day. So, too, do the
arguments on the other side. The innovators who developed the player piano
argued that “it is perfectly demonstrable that the introduction of automatic
music players has not deprived any composer of anything he had before their
introduction.” Rather, the machines increased the sales of sheet music. [8] In
any case, the innovators argued, the job of Congress was “to consider first the
interest of [the public], whom they represent, and whose servants they are.”
“All talk about ’theft,’“ the general counsel of the American Graphophone
Company wrote, “is the merest claptrap, for there exists no property in ideas
musical, literary or artistic, except as defined by statute.” [9]

The law soon resolved this battle in favor of the composer and the recording
artist. Congress amended the law to make sure that composers would be paid for
the “mechanical reproductions” of their music. But rather than simply granting
the composer complete control over the right to make mechanical reproductions,
Congress gave recording artists a right to record the music, at a price set by
Congress, once the composer allowed it to be recorded once. This is the part of
copyright law that makes cover songs possible. Once a composer authorizes a
recording of his song, others are free to record the same song, so long as they
pay the original composer a fee set by the law.

American law ordinarily calls this a “compulsory license,” but I will refer to
it as a “statutory license.” A statutory license is a license whose key terms
are set by law. After Congress’s amendment of the Copyright Act in 1909, record
companies were free to distribute copies of recordings so long as they paid the
composer (or copyright holder) the fee set by the statute.

This is an exception within the law of copyright. When John Grisham writes a
novel, a publisher is free to publish that novel only if Grisham gives the
publisher permission. Grisham, in turn, is free to charge whatever he wants for
that permission. The price to publish Grisham is thus set by Grisham, and
copyright law ordinarily says you have no permission to use Grisham’s work
except with permission of Grisham.

But the law governing recordings gives recording artists less. And thus, in
effect, the law subsidizes the recording industry through a kind of piracy—by
giving recording artists a weaker right than it otherwise gives creative
authors. The Beatles have less control over their creative work than Grisham
does. And the beneficiaries of this less control are the recording industry and
the public. The recording industry gets something of value for less than it
otherwise would pay; the public gets access to a much wider range of musical
creativity. Indeed, Congress was quite explicit about its reasons for granting
this right. Its fear was the monopoly power of rights holders, and that that
power would stifle follow-on creativity. [10]

While the recording industry has been quite coy about this recently,
historically it has been quite a supporter of the statutory license for records.
As a 1967 report from the House Committee on the Judiciary relates,

“the record producers argued vigorously that the compulsory license system must
be retained. They asserted that the record industry is a half-billion-dollar
business of great economic importance in the United States and throughout the
world; records today are the principal means of disseminating music, and this
creates special problems, since performers need unhampered access to musical
material on nondiscriminatory terms. Historically, the record producers pointed
out, there were no recording rights before 1909 and the 1909 statute adopted the
compulsory license as a deliberate anti-monopoly condition on the grant of these
rights. They argue that the result has been an outpouring of recorded music,
with the public being given lower prices, improved quality, and a greater
choice.” [11]

By limiting the rights musicians have, by partially pirating their creative
work, the record producers, and the public, benefit.

Radio

Radio was also born of piracy.

When a radio station plays a record on the air, that constitutes a “public
performance” of the composer’s work. [12] As I described above, the law gives
the composer (or copyright holder) an exclusive right to public performances of
his work. The radio station thus owes the composer money for that performance.

But when the radio station plays a record, it is not only performing a copy of
the composer’s work. The radio station is also performing a copy of the
/recording artist’s work. It’s one thing to have “Happy Birthday” sung on the
radio by the local children’s choir; it’s quite another to have it sung by the
Rolling Stones or Lyle Lovett. The recording artist is adding to the value of
the composition performed on the radio station. And if the law were perfectly
consistent, the radio station would have to pay the recording artist for his
work, just as it pays the composer of the music for his work.

But it doesn’t. Under the law governing radio performances, the radio station
does not have to pay the recording artist. The radio station need only pay the
composer. The radio station thus gets a bit of something for nothing. It gets to
perform the recording artist’s work for free, even if it must pay the composer
something for the privilege of playing the song.

This difference can be huge. Imagine you compose a piece of music. Imagine it is
your first. You own the exclusive right to authorize public performances of that
music. So if Madonna wants to sing your song in public, she has to get your
permission.

Imagine she does sing your song, and imagine she likes it a lot. She then
decides to make a recording of your song, and it becomes a top hit. Under our
law, every time a radio station plays your song, you get some money. But Madonna
gets nothing, save the indirect effect on the sale of her CDs. The public
performance of her recording is not a “protected” right. The radio station thus
gets to pirate the value of Madonna’s work without paying her anything.

No doubt, one might argue that, on balance, the recording artists benefit. On
average, the promotion they get is worth more than the performance rights they
give up. Maybe. But even if so, the law ordinarily gives the creator the right
to make this choice. By making the choice for him or her, the law gives the
radio station the right to take something for nothing.

Cable TV

Cable TV was also born of a kind of piracy.

When cable entrepreneurs first started wiring communities with cable television
in 1948, most refused to pay broadcasters for the content that they echoed to
their customers. Even when the cable companies started selling access to
television broadcasts, they refused to pay for what they sold. Cable companies
were thus Napsterizing broadcasters’ content, but more egregiously than anything
Napster ever did—Napster never charged for the content it enabled others to give
away.

Broadcasters and copyright owners were quick to attack this theft. Rosel Hyde,
chairman of the FCC, viewed the practice as a kind of “unfair and potentially
destructive competition.” [13] There may have been a “public interest” in
spreading the reach of cable TV, but as Douglas Anello, general counsel to the
National Association of Broadcasters, asked Senator Quentin Burdick during
testimony, “Does public interest dictate that you use somebody else’s property?”
[14] As another broadcaster put it,

“The extraordinary thing about the CATV business is that it is the only business
I know of where the product that is being sold is not paid for.” [15]

Again, the demand of the copyright holders seemed reasonable enough:

“All we are asking for is a very simple thing, that people who now take our
property for nothing pay for it. We are trying to stop piracy and I don’t think
there is any lesser word to describe it. I think there are harsher words which
would fit it.” [16]

These were “free-ride[rs],” Screen Actor’s Guild president Charlton Heston said,
who were “depriving actors of compensation.” [17]

But again, there was another side to the debate. As Assistant Attorney General
Edwin Zimmerman put it,

“Our point here is that unlike the problem of whether you have any copyright
protection at all, the problem here is whether copyright holders who are already
compensated, who already have a monopoly, should be permitted to extend that
monopoly. ... The question here is how much compensation they should have and
how far back they should carry their right to compensation.” [18]

Copyright owners took the cable companies to court. Twice the Supreme Court held
that the cable companies owed the copyright owners nothing.

It took Congress almost thirty years before it resolved the question of whether
cable companies had to pay for the content they “pirated.” In the end, Congress
resolved this question in the same way that it resolved the question about
record players and player pianos. Yes, cable companies would have to pay for the
content that they broadcast; but the price they would have to pay was not set by
the copyright owner. The price was set by law, so that the broadcasters couldn’t
exercise veto power over the emerging technologies of cable. Cable companies
thus built their empire in part upon a “piracy” of the value created by
broadcasters’ content.

These separate stories sing a common theme. If “piracy” means using value from
someone else’s creative property without permission from that creator—as it is
increasingly described today [19]—then every industry affected by copyright
today is the product and beneficiary of a certain kind of piracy. Film, records,
radio, cable TV. ... The list is long and could well be expanded. Every
generation welcomes the pirates from the last. Every generation—until now.